According to police reports, a state housing development official was found dead on March 6 after an evident suicide. This was only one of the results of the scandal surrounding land speculation by public servants that has been shaking the nation. According to The Korean Herald, the official of the Korea Land and Housing Corporation (LH) was found inside a shipping container. Although not part of the investigation into LH officials over land speculation, questions were raised by the local media regarding his suspicious land purchases. On March 12, just six days after his death, yet another LH official was found dead, which was also deemed a suicide. It seems hard to deny that the LH land speculation case runs deep given that it has possibly spurred connected individuals to take their own life. Therefore, there is no doubt that the LH land speculation case needs to be dug deeper.
LH is a market public corporation under the Ministry of Land, Infrastructure, and Transport (MOLIT) that is responsible for the development, maintenance, and management of land, housing, and cities. The intended purpose of the company is to contribute to the growth of the national economy by promoting the improvement of national housing and the efficient use of public land. It acquires and supplies plots of land and develops cities to achieve this goal. However, the information that came to light recently seems to suggest that the corporation is operating against its own agenda.
In March, allegations that employees at LH collectively engaged in real estate speculation in areas subject to LH plans were made by the People's Solidarity for Participatory Democracy (PSPD), a South Korean non-governmental organization. Since then, further revelations and investigations have led to the current controversy surrounding several public officials, which has emerged as a key issue in politics. PSPD stated specifically that LH employees purchased 10 billion won worth of land in Gwangmyeong and Siheung; these areas were designated by the government as the location for a third “new town,” a city that is “planned and built as a single project,” according to the Collins Dictionary.
The public has called for severe disciplinary measures against the involved state employees, which is not surprising given Korea’s current housing market. Housing prices have skyrocketed and has been rising continuously despite a series of government measures to counter the phenomenon, causing citizens to struggle greatly. This situation contrasts sharply with the LH employees, many of whom exploited their position to profit in the real estate market. The government has vowed to implement a zero-tolerance policy for public servants found to be involved in real estate speculation using insider information, promising to file criminal charges and have them pay back more than their ill-gotten gains. To fully understand the controversy, it is vital to first take a closer look at the specific illegal actions of the company’s employees.
The Illegality of the LH Employees’ Land Speculation
Land speculation refers to the act of buying undeveloped land in the hope that it will gain the interest of developers and rise in value. The speculator can then take advantage of the changes in market price and sell the property for a significant profit. In this instance, LH employees used insider information to speculate for personal benefit, which crossed legal boundaries and angered the public.
Lawyers for PSPD stated that, altogether, LH employees obtained 23,000 square meters of land in Gwangmyeong and Siheung under the pretext of purchasing farmland. The problem is that both of these areas had already been selected by the government as the site for a third new town for an estimate of 70,000 households. The employees then split the land into sections of around 1,000 square meters and planted dragon willow seedlings to maintain the land’s illegal cover, which was that it was used for agriculture. Moreover, the species of dragon willow had been specially selected and planted because of its high price and the profitable returns it would bring.
Each of these trees are legally required to occupy four square meters by itself, but it has been reported that as many as 25 seedlings were planted per square meter by LH employees. This means that not only did the employees seek monetary returns by breaching agricultural codes, but they also unnecessarily exhausted natural resources with unhealthy planting methods. Furthermore, the potential profit from the trees has been calculated to be approximately one million won per square meter. Because the unit of land purchased by each LH employee exceeded 1,000 square meters, this would result in returns of more than one billion won per person.
The Investigation Process
Initial suspicion arose on March 2 when activists at PSPD and the organization Lawyers for a Democratic Society issued allegations that 14 LH employees purchased land in Gwangmyeong and Siheung based on insider information. LH then issued a formal apology addressing and confirming the suspicions. The 13 employees that were accused of land speculation were suspended immediately. LH’s admission caused matters to spiral out of control, with the public upset by the fact that a civic organization broke its promise of transparency. In response, President Moon Jae-in ordered a complete investigation of LH employees, associated individuals, and related agencies to look into additional speculative land purchases. It was announced the investigation would be directed by an interagency probe team led by the Prime Minister’s office and MOLIT.
The interagency investigative team got off to a slow start, which attracted criticism from the public. They were criticized for carrying out a complete investigation, which was an impractical choice. In order to investigate individuals, the team had to acquire consent forms for the collection of personal information. However, due to the large number of officials and employees, it was decided that a total investigation of all individuals related to the case would not be possible. Thus, the full investigation was put aside and is predicted to be put on hold indefinitely.
Due to the limitations of the interagency investigative team, on March 8, Prime Minister Chung Sye-kyun asked Nam Gu-jun, the head of the National Investigation Headquarters, to form a new investigative team consisting of the police and other related agencies. Referred to as the Joint Special Investigation Headquarters, the team’s goal is to conduct a thorough and broad investigation with the help of various institutions. By joining forces with organizations such as the National Tax Service and the Financial Service Commission, the team hopes to reveal not only illegal real estate transactions but also borrowed-name transactions, and unregistered resales.
The prosecution’s role in the investigation has been a major topic of debate because the prosecution was excluded from the Joint Special Investigation Headquarters. Having been a key player in previous joint investigations, the prosecution’s absence in this particular investigation confused the public. The main reason for the lack of participation was the revised Prosecutors’ Office Act introduced by the ruling Democratic Party of Korea (DPK). This act restricts the prosecution’s ability to conduct direct investigations to only crimes relating to corruption, the economy, public officials, defense projects, elections, and large-scale disasters. Thus, it was ruled that the LH land speculation scandal was outside the prosecution’s jurisdiction because criminal charges related to real estate speculation do not fall into one of the six designated areas.
According to Hankyoreh, a South Korean newspaper, former Prosecutor General Yoon Seok-yeol strongly criticized DPK, claiming its efforts to reduce the power of the prosecution was “a regression of democracy that destroys the spirit of the constitution.” However, Yoon’s words merely seemed to spur on DPK’s plan to strip the prosecution of its investigation rights. According to Hankyoreh, the party announced on March 21 that it would revise Article 196 of the Criminal Procedure Act. Doing so would prohibit the prosecution from conducting direct investigations. Furthermore, the ruling party also announced that an investigative agency will be created under the Ministry of Justice, with the purpose of investigating the six major crime areas that were originally allotted to the prosecution.
DPK’s intention to weaken the prosecution’s power outraged the public, with many arguing that the prosecution should play an essential role in all investigations, including the one into LH. It has been emphasized that, in order to ensure a thorough investigation, the police needs the help of experienced prosecutors who are able to employ aggressive investigation tactics. However, others have stated that the lack of the prosecution’s involvement will not necessarily result in an insufficient investigation.
Professor Jeong Shin-gyo (Department of Maritime Police, National Mokpo Maritime University) stated, “As the prosecution is experienced in high-level crimes, its investigation tactics may be better than those of the police. However, if the prosecution takes a part in the LH investigation after the revision of the Criminal Procedure Act, it will lead to distrust in the police’s ongoing investigation. The police has conducted joint investigations with the prosecution in the past, so I believe the institution is capable of conducting a thorough investigation.” Therefore, it may be better for the public to perhaps reserve their judgement for now regarding the current investigation into LH.
Nonetheless, demand for the prosecution’s involvement continued to rise and in response, the ruling party assembled a special prosecution team to focus on unveiling LH employees’ misconduct. Although the motivation for this seems reasonable, Professor Kim Jae-pil (Graduate School of Public Policy, Hanyang University) stated that this was a controversial issue because the government’s choice to reintroduce the prosecution can be seen as a contradiction of their past words and actions. He went on to say that “the ruling and opposition party’s decision to introduce the Special Prosecution team may be considered a result of political compromise. It also leads the public to question the integrity and thoroughness of the police investigation.”
Responses Across the Board
Responses have varied widely across the social spectrum, with the public at one end and civil servants at the other. On the public’s end, many have expressed their anger on social media and have protested outside LH office buildings. The public’s anger was especially strong because of LH’s status as a government-owned corporation. The crimes were seen as particularly corruptive because of LH’s intended purpose of serving the public, not its employees’ personal interests.
Equity and fairness are significant virtues, especially in modern South Korea where extreme competition is prevalent. People are always on the lookout to see is anyone is benefitting from undeserving privileges — with good reason, more often than not. This interest primarily arises from a social divide so severe that citizens separate themselves into so-called “gold spoons” and “dirt spoons.” Gold spoons refer to those born and raised in an affluent family, while dirt spoons refer to those with very low socioeconomic status. This divide creates an insidious stigma, with people being viewed and treated differently based on their origins. Because no one deserves to be judged in this way, South Korea is keen to achieve social equality.
However, recent cases of corruption, including former Minister of Justice Cho Kuk’s forgery of documents and illegal investments and former Mayor of Seoul Park Won-soon’s sexual misconduct, have revealed Korea’s harsh reality – it is far from an equal society. On top of these scandals, the real estate policies pushed by President Moon have heavily contributed to the public’s dissatisfaction with the government.
According to Kim Seong-dal, the Director of the Real Estate Construction Reform Headquarters at the Citizens’ Coalition for Economic Justice, “Moon’s administration proposed a total of 26 real estate policies over the past four years but the apartment prices in Seoul have increased by 80 percent. Due to rising house prices, the public’s distrust of the government had already risen, and LH’s land speculation scandal was the final straw. If President Moon wishes to lower housing prices, he should hold accountable those officials who oversaw those policies and take measures to improve public housing policies for state-run companies.”
This scandal is a direct hit to President Moon’s administration because lowering housing prices was one of the main goals that Moon promised to achieve at the beginning of his time in office. The inability of the government to stabilize housing prices in addition to the LH land speculation scandal has exposed its ineptitude. The current anti-speculation measures and housing policies are viewed as rather surface level in nature, and many see this as the government simply trying to quell the public’s anger.
Public anger was further fueled at the other end of the social spectrum with the actions of LH employees. According to Chosun Media, the employees were unapologetic, mocking the public and making inappropriate comments about the scandal. This only showed that the formal apology LH released was merely a way for them to escape the uncomfortable situation they were in. On Blind, an anonymous messaging app for employees, LH workers expressed their indifference and remorseless feelings about the speculation.
One employee posted a screenshot of a group chat room where fellow workers shared pictures of a public protest outside an LH building. All of the employees made jokes about it, with one employee saying how the protest meant nothing as it could not be heard from where they were working on the 28th floor. In response to those criticizing LH employees for not realizing the severity of their misdeeds, employees laughed that “it was not the first time that this has happened anyway.” The derisive comments were a bad look for the company, and the public was given more reasons to distrust and criticize LH.
Due to the scandals revolving around civil servants and public agencies, conspiracy theories, albeit far-fetched, have even started to circulate that the South Korean government was involved in the land speculation. Again, the prosecution’s exclusion from the joint investigation is what prompted the public to raise questions about the government’s involvement and intentions. Some alleged that the ruling party was trying to cover for its members who took part in LH’s wrongdoings. Furthermore, the fact that the Minister of Land Byeon Chang-heum was the head of LH until December of last year did not help the government to regain the public’s trust. As a result of the public’s harsh criticism, Byeon offered his resignation on March 12.
Governmental Response and Prevention Efforts
Amid the public’s reaction towards the LH controversy, it has been pointed out that in addition to penalizing the guilty, sufficient measures should be implemented to prevent a similar occurrence. The current law neglects potential real estate speculation by public officials and public institutions. According to Hankyoreh, the laws that prohibit and punish officials and executives of public institutions such as MOLIT and LH belong to the Anti-Corruption Act and the Special Act on Public Housing.
Article 7 of the Anti-Corruption Act prohibits the use of "secrets in the process of conducting business" to make property gains, with potential punishments of either imprisonment for seven years or a fine of up to 70 million won. Whether or not one is guilty under this clause depends on "work relevance.” According to PSPD, many of the LH employees who acquired land are in charge of compensation in the metropolitan area. MOLIT and LH reported that 13 employees bought 12 sections of land. Nonetheless, further investigation reported that they were not employees of the department associated with the new town site or the Gwangmyeong Siheung Business Headquarters. In other words, according to the law, there is no primary business relationship between some of the employees and their purchased land; thus, the employees’ connection to the land was not strong enough to charge them.
Article 9 of the Special Act on Public Housing also prohibits the use of confidential information and the misuse of property related to the designation of public housing zones. However, this is only applied if information learned during "work processing" is utilized, with the punishment being a sentence of up to five years in prison or a fine of up to 50 million won. Moreover, even if the relation to work is recognized, there is room to argue that the new towns of Gwangmyeong and Siheung are not "business secrets" recognized by the aforementioned acts. In fact, there is no actual way to sanction the gain of development profits by using secret information if the party in question does not actually work in a directly responsible department. Therefore, there is a strong possibility that the accused public officials and employees of public institutions may face extremely lenient consequences. For this reason, the public has demanded stricter regulations and preventative actions.
Kim Seong-dal stated that she has been considering policy measures to eradicate land speculation. "Real estate speculation is the root of the country's collapse, and it has turned out to be prevalent in officialdom," she stated. "People know that real estate speculation is not desirable, but the government is stimulating speculation through hot and cold measures and economic stimulus policies," she added. In turn, it should be noted that a society which strongly enforces policies will play a much more direct role in eradicating real estate speculation.
Currently, public officials are subjected to regular monitoring through property disclosure to prevent them from unfairly increasing their assets by abusing their authority under the Public Officials Ethics Act, but it seems to be ineffective. This may be because its aim is limited. As of now, only employees of a higher status are required to disclose information; not all employees of public institutions are included on the list. Kim Seong-dal contended, “All agencies and department employees related to housing supply should be required to register, and the heads of related agencies should establish a system to monitor real estate speculation on a regular basis." Professor Kim Jae-pil added along the same lines that the most vital step is to eradicate “the behavior of public officials using information they learned in the course of their work,” supporting a system in which officials “reported private stakeholders related to their work.” In short, new policies focusing on the handling of information and transparency are compulsory requirements.
Indeed, while new laws or reformations of existing regulations are sorely needed, a nation-wide introspection should be the top priority. The circumstances of the LH scandal make it hard to deny the prevalence of injustice, perhaps proving people’s worst fear about what lies beneath the surface of Korean society. From illegal speculation of land and corruption by public servants to a slow-moving, doubtful investigation, the LH scandal possesses layers that are unjust at worst and questionable at best. The public’s heated fury in response to the controversy has obviously been justifiable. Nevertheless, as every cloud has a silver lining, there is prospect in that being aware of injustice can bring about bright consequences. With collaborative efforts between the government and civilians as well as aid from future policies, there still seems to be a glimmer of hope for justice in Korea.